Regulation and the “Big Case”

Frederick Schauer and Richard Zeckhauser have posted “The Trouble With Cases” on SSRN. This article makes an interesting argument about the dearth of rigorous empirical basis for regulation – by litigation and by legislation as well.  CAFA is a wonderful example of the problem they point to.  Here is the abstract:

For several decades now a debate has raged about policy-making bylitigation. Spurred by the way in which tobacco, environmental, andother litigation has functioned as an alternative form of regulation,the debate is about whether policy-making or regulation by litigationis more or less socially desirable than more traditional policy-makingby ex ante rule-making by legislatures or administrative agencies. Inthis paper we enter the debate, but not to come down on one side oranother, all things considered, of the litigation versus ex anterule-making regulatory debate. Rather, we seek to show that any form ofregulation that is dominated by high-salience particular cases ishighly likely, because of the availability heuristic and relatedproblems of representativeness, to make necessarily general policy onthe basis of unwarranted assumptions about the typicality of one or afew high-salience cases or events. And although this problem isvirtually inevitable in regulation by litigation, it is far from absenteven in ex ante rule-making, because such rule-making increasinglytakes place in the wake of, and dominated by, particularly notoriousand often unrepresentative outlier events. In weighing the value ofregulation by ex ante rule-making against the value of regulation bylitigation, it is important for society to recognize that anyregulatory form is less effective just insofar as it is unable totranscend the distorting effect of high-salience unrepresentativeexamples.

ADL